California wildfires drive insurer Travelers’ losses amid tight regulations

The insurance bellwether stated on Wednesday that insurer Travelers’ profit fell 60% in the first quarter as its vulnerability to the Los Angeles wildfires led to a record disaster loss of over $2 billion.

Natural Disaster Fallout Hits Insurers Hard

The devastating January wildfires in California — one of the costliest natural disasters in the state’s history — have left a lasting impact on the insurance industry. The fires, which claimed several lives and caused widespread property destruction, are estimated to have caused economic losses of up to $250 billion.

Despite efforts by major insurers like Travelers‘ to reduce exposure in high-risk areas, the scale of the catastrophe has inflicted heavy financial damage. For the quarter ending March 31, Travelers reported catastrophe losses of $2.27 billion, a sharp increase from $712 million a year earlier.

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The company’s core profit dropped to $443 million, or $1.91 per share, from $1.1 billion ($4.69 per share) in the previous year.

“We are pleased to report a substantial profit for the quarter despite the devastating January California wildfires,” said CEO Alan Schnitzer.

Tough Regulations Blamed for Industry Struggles

Insurers continue to criticize California’s strict regulatory environment, which mandates that insurers seek approval from state regulators before raising premiums for most policies. Industry leaders argue that this makes it difficult to price insurance based on actual risk, especially in a state frequently hit by wildfires.

“Regulatory policies that disconnect pricing and terms from actual risk drive insurers out of the market, reducing competition and limiting consumer choice,” Schnitzer said in a recent LinkedIn post.

Mounting Costs and Market Pressures

Adding to insurers’ woes are potential tariffs that could inflate the cost of building materials and auto parts, driving up repair and replacement costs. Carriers may be forced to either absorb these costs or pass them on to consumers through higher premiums.

Critics of deregulation, however, maintain that strong oversight is essential in a state where the hidden costs of homeownership — including taxes, insurance, and utilities — are already among the highest in the U.S.